How Are Whistleblowers Paid

Given the career risk many people take when they decide to blow the whistle, a natural question is how much money you can potentially receive if your information and efforts lead to a successful prosecution? The answer is, a lot. For example, in 2012, four whistleblowers split approximately $250 million related to a case brought against GlaxoSmithKline for marketing practices involving Paxil, Wellbutrin and Avandia. Many other less well known cases have paid out seven or eight figure sums to whistleblowers. Over the last several years, the average False Claims Act whistleblower payout has been about $1.7 million.

While many whistleblower statutes reward whistleblowers with a share of the proceeds, the one that routinely pays out the most money is the Federal False Claims Act (FCA). Under the FCA, if the government intervenes in a case brought by a whistleblower, it will pay a reward of 15% to 30% of the total money recovered from the defendants. If the government does not intervene and the whistleblower and her counsel prosecute the case on their own, then the government pays a reward of between 25% and 30%.

When many millions of dollars are at stake, the difference between 15% and 30% can be substantial. Given that, how is the percentage ultimately determined? In most cases, there is a negotiation between the whistleblower's counsel and the government. If they cannot agree, the Court makes the determination.

In 1996, the Department of Justice (DOJ) published guidelines for determining a whistleblower's award. Courts have largely adopted these guidelines in making determinations. Using 15% as a minimum award, here are the factors that weigh in favor of an upward adjustment:

1. The whistleblower reported the fraud promptly.
2. When he learned of the fraud, the whistleblower tried to stop the fraud or reported it to a supervisor or the Government.
3. The action, or the ensuing investigation, caused the offender to halt the fraudulent practices.
4. The complaint warned the Government of a significant safety issue.
5. The complaint exposed a nationwide practice.
6. The whistleblower provided extensive, first-hand details of the fraud to the Government.
7. The Government had no knowledge of the fraud.
8. The whistleblower provided substantial assistance during the investigation and/or pretrial phases of the case.
9. At his deposition and/or trial, the whistleblower was an excellent, credible witness.
10. The whistleblower’s counsel provided substantial assistance to the Government.
11. The whistleblower and his counsel supported and cooperated with the Government during the entire proceeding.
12. The case went to trial.
13. The FCA recovery was relatively small.
14. The filing of the complaint had a substantial adverse impact on the whistleblower.

The factors that weigh towards a downward adjustment are as follows:
1. The whistleblower participated in the fraud.
2. The whistleblower substantially delayed in reporting the fraud or filing the complaint.
3. The whistleblower, or whistleblower’s counsel, violated FCA procedures by, for example, failing to file the complaint under seal, disclosing a copy of the complaint to the defendant, publicizing the case while it is under seal, or not providing the government with a statement of material facts and evidence.
4. The whistleblower had little knowledge of the fraud or only suspicions.
5. The whistleblower’s knowledge was based primarily on public information.
6. The whistleblower learned of the fraud in the course of his Government employment.
7. The Government already knew of the fraud.
8. The whistleblower, or whistleblower’s counsel, did not provide any help after filing the complaint, hampered the Government’s efforts in developing the case, or unreasonably opposed the Government’s positions in litigation.
9. The case required a substantial effort by the Government to develop the facts to win the lawsuit.
10. The case settled shortly after the complaint was filed or with little need for discovery.
11. The FCA recovery was relatively large.

(According to the DOJ the following exception applies: Section 3730(d)(1) of the FCA limits the whistleblower to no more than 10 percent of the proceeds when the complaint is based primarily on public information and that Section 3730(d)(3) allows the court to reduce the percentage below 15 percent if the whistleblower planned and initiated the fraud, and requires the court to dismiss the whistleblower if he is convicted for the actions giving rise to the submission of the false claims.)
The total potential damages (from which the whistleblower’s award is calculated) has never been higher. In 2017, the per claim penalty was increased to a range of $10,957 to $21,916 per claim, plus treble damages or three times the amount of damages the government sustains because of the false claim.

Many lawyers who regularly handle these cases (including my firm) do so on a contingency basis, meaning we don’t charge a fee unless our clients prevail. The attorneys also front all of the case expenses and are only reimbursed if there is a recovery. The attorney's fees vary and are typically a percentage of the whistleblower’s award. The range is typically from one third to 45% depending on a number of factors including whether the Government intervenes.

Most people who decide to become whistleblowers don't do it solely for money. They are typically motivated by a strong sense of justice and fair play. However, given the risk and time commitment involved with blowing the whistle, monetary upside is a legitimate consideration. I hope this article sheds more light on the financial end of this momentous decision. In my firm’s blog, which is on our website, we address many of the other issues potential whistleblowers face along with some common scenarios that could give rise to a claim.

Author Bio:

Joseph Gentile is a founding member of Sarraf Gentile LLP and has advised and represented individual and institutional clients on a wide range of financial and corporate issues.

Mr. Gentile has litigated class actions, whistleblower and other complex cases his entire career. He has secured multi-million dollar recoveries on behalf of his clients against Fortune 500 companies. In 2014, Mr. Gentile was selected as a “Rising Star” by Super Lawyers.

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